For Texas’s commercial litigation bar and their clients, the wait is over. Texas’ business court is open for business.
But it’s still a court of limited jurisdiction, and securing a hearing there is far from guaranteed. The business court can only hear the kinds of disputes listed in its jurisdictional statute, the new Texas Government Code § 25A.004.
One of those kinds of cases, claims worth over $10 million, will prove a common target for corporate parties seeking a forum in the business court. The business court has jurisdiction over “actions in which the amount in controversy exceeds $10 million” that also “aris[e] out of a qualified transaction” or “arise[ ] out of a contract or commercial transaction in which the parties to the contract or transaction agreed … that the business court has jurisdiction of the action.”
Unlike the business court’s other jurisdictional grants — for internal corporate-governance matters, securities claims and companies’ claims against their fiduciaries — the jurisdictional grant for certain $10 million-plus claims is broad. It can encompass disputes between buyers and sellers, disputes over corporate mergers, disputes with competitors, and the list goes on. As a result, we call it jurisdiction over “external” disputes. Here we explain how parties who find themselves in a $10 million-plus dispute can get the most out of this business court jurisdictional grant.
Interpreting the Amount in Controversy
For parties seeking a business court forum, interpreting the amount-in-controversy requirement is key. Some situations are straightforward. For example, if the defendant agreed to purchase $20 million of goods from the plaintiff but never tendered any payment, it’s very likely that the resulting breach-of-contract claim has an amount in controversy of over $10 million.
Others are more difficult. How will the business court determine the amount in controversy for cases about injunctive or declaratory relief? Federal court lawyers will remember that, for diversity jurisdiction, federal law is willing to place a monetary value on nonmonetary relief. Texas law is less familiar with this analysis. Statutory and constitutional county courts have jurisdiction that’s limited by amounts in controversy, but precedent analyzing the value of nonmonetary relief under this requirement is slim to none.
The federal approach makes good sense for adoption by the Texas business court. There are sound reasons to avoid treating cases differently based solely on whether the relief sought is backward-looking damages or a forward-looking injunction. The case’s value, not the form of relief, is what matters. So relief other than damages should count for determining the amount in controversy.
Once a party satisfies the amount in controversy — $10 million — other steps remain. To access business court jurisdiction over an external dispute, a party must next demonstrate that the case either arises from a “qualified transaction” or that the parties have “agreed” to submit to business court jurisdiction.
Option 1: The Qualified Transaction
To access jurisdiction based on a “qualified transaction,” a party must allege a $10 million value twice over. The first time is the amount in controversy that we’ve just discussed. According to the Code, the second time is establishing that the case “aris[es] out of a qualified transaction,” which means a transaction (other than a bank loan) where a party (A) was to pay or receive “consideration with an aggregate value of at least $10 million,” or (B) was to borrow or lend “money or credit with an aggregate value of at least $10 million.”
Although the qualified transaction element uses the same dollar figure, it should be easier to satisfy than the amount in controversy. The term “aggregate value of at least $10 million” gives a broad scope to “qualified transaction.” “Aggregate value” unquestionably includes, with no need for further interpretive tools, anything of value. And the adjective “aggregate” means that this value could come from multiple sources. So the “qualified transaction” requirement can accommodate a range of theories to establish a transaction’s value.
Can parties exert any further control over whether a dispute arises from a qualified transaction? One possible course of action merges with our next discussion — using agreements to access business court jurisdiction.
Option 2: Using Agreements to Secure Business Court Jurisdiction
If the $10 million amount in controversy is met but the matter doesn’t arise out of a qualified transaction, another independent path to business court jurisdiction is to agree on it. Jurisdiction is available if the amount in controversy exceeds $10 million and the “action that arises out of a contract or commercial transaction in which the parties to the contract or transaction agreed in the contract or a subsequent agreement that the business court has jurisdiction of the action.”
The opportunities to make such an agreement are readily apparent. Texas generally enforces forum selection clauses, and this particular forum will appeal to many commercial parties. Agreements ranging from sales contracts to billion-dollar mergers can include a forum selection clause to take the business court up on its offer of jurisdiction. And this grant of jurisdiction isn’t limited to contract claims. Although the parties must have agreed to jurisdiction and completed a “commercial transaction” from which the dispute arose, this provision doesn’t exclude tort claims.
Agreements could also reinforce or expand the qualified transaction grant of jurisdiction. If the parties agree that they are consummating a “qualified transaction” under Texas Government Code Code §§ 25A.004(d)(1) and 25A.001(14), they arguably accept an estoppel against later challenging the existence of a qualified transaction. The business court may, of course, examine its own jurisdiction in some cases. But removing the opposing party’s objection to jurisdiction is one less obstacle to securing a business court forum.
Even more effective, parties can make an ex ante agreement not to challenge supplemental jurisdiction in the business court. The business court has supplemental jurisdiction over claims that are sufficiently related to be part of the same case or controversy as other claims already within its jurisdiction. There is even a class of claims that can only be adjudicated by the business court if they’re within its supplemental jurisdiction — the exclusions, which include claims by or against government entities, claims for foreclosure, and noncompete claims. But supplemental jurisdiction is easily defeated: “A claim within the business court’s supplemental jurisdiction may proceed in the business court only on the agreement of all parties to the claim and a judge of the division of the court.” So an agreement not to dispute supplemental jurisdiction removes not just an objection but a potential veto.
Conclusion
The Legislature has granted the business court jurisdiction over a broad set of external disputes worth over $10 million. Parties with legal matters approaching this valuation have tools at their disposal to secure the best chance of a business court forum.